Supply Chain Continuity Planning Mario Hegewald Director, Global - PDF document

Supply Chain Continuity Planning Mario Hegewald Director, Global Logistics An Unwelcome Call From The CEO Illustrative “Very few “Very few candidates came candidates came “They’ve already by our table at “They’ve already by our table at filed a lawsuit the M.B.A. filed a lawsuit the M.B.A. “My phone’s “My phone’s against us over against us over career fair career fair “The stock “This is a been ringing off “The stock “This is a been ringing off this.” “Our core market yesterday.” this.” “Our core market yesterday.” supplier issue. the hook with price is already supplier issue. the hook with price is already is 13-18 year is 13-18 year SCM had down 6% over SCM had calls from the down 6% over calls from the olds and we use olds and we use the last three better have an press.” the last three better have an press.” child labor!!!” child labor!!!” answer…” days.” answer…” days.” “ Well, the supplier did sign “ Well, the supplier did sign “…although apparently our code of conduct…” “…although apparently our code of conduct…” that wasn’t good enough that wasn’t good enough Supply Chain

Enterprise Vulnerability Map P6 Loss of many High Suppliers Single Port Closure Labor P5 Unrest DISRUPTION PROBABILITY Transportation Loss of Key Link Disruption Visible Quality Supplier Customs Dispute Problems P4 Product IT System Computer Failure Tampering Virus Flood Accounting Multiple Port Irregularity Closure Workplace Violence Technological Earthquake Change P3 Wind Employee Damage Low Sabotage Severe Light CONSEQUENCES P = PANDEMIC Phases Source: Yossi Sheffi – “The Resilient Enterprise” Variety of Supply Chain Risks Unethical Unethical Sudden Sudden Loss of Supplier Loss of Supplier Rapidly Rising Rapidly Rising Natural or Manmade Natural or Manmade Supplier Behavior Supplier Behavior Deterioration in Deterioration in Commodity Commodity Disaster which Shuts Viability due to Viability due to Disaster which Shuts which Threatens which Threatens Supplier Supplier Down Suppliers Financial Crisis Financial Crisis Price Price Down Suppliers Eaton Eaton’ ’s s Performance Performance Reputation Reputation Bus Cont Plan : � Codes of � Financial � Education � Hedging, Conduct Statements � Disaster Recovery � Global Market � Periodic Site � SLAs Solvency � Training � Mitigation Analysis Visits Mitigation Analysis � Scorecards � Alternative Toolkit Toolkit � Third-Party � Image Ranking, � Third Party Data � WISPER Sourcing Sources � Ethics Education Services Strategies � CEO Metal Report and � Open Ratings � Logistics Communication contingencies Economist, Owner SCM SCM HR, OPS, SCM, IT SCM Owner Treasury, SCM SCM has to mitigate all kinds of Supply Chain Risks

Survey Results: Avian Flu Preparedness* “How concerned are you that Avian Flu will affect your Do you have a plan for Avian Flu Outbreak? plant within the next 3 months?” 80% 100% 70% 87% 88% 60% 71% 50% Not at all concerned 51% Not very concerned Yes 40% 49% Somewhat concerned No 30% Very concerned 29% 20% 13% 13% 10% 0% 0% North America Western Eastern Asia Pacific Latin America North Western Eastern Asia Pacific Latin Europe Europe America Europe Europe America Selected comments from suppliers • Preventative vaccinations/Flu shots and surgical • Create antibacterial cleaning stations masks for all employees at company’s expense. throughout the facility. • Build up supply of Tamiflu for all on site • Directives of Italian Government are in place – employees. they have a stock of vaccines. • Follow CDC guidelines and rely on Government • Canadian Government has a plan in place. plan. • Travel restrictions and keep our people out of • Education around how to prevent the spread of China. disease/germ transfer. Concern and Preparedness, though low, are highest in APAC Case Study: Penske and FedEx help in time of Crisis Situation: Post-Katrina recovery requires huge volume of trucks to head to affected area, creating carriage shortages in the North. At the same time, Oracle implementation issues create delivery crisis for the Truck Group requiring expedited logistics services. Continuity Solution: Penske, FedEx and the Eaton Logistics Team work together to get trucks in the right place at the right time, and service our customers without disruption. Outcome: Successful. Learning: Relying on and facilitating coordination between world class logistics providers to assure continuity of operations works. Pre- defined roles and responsibilities would have helped.

Case Study: Mexican Government Shuts Down Natural Gas to SLP Situation: To affect repairs to natural gas pipelines, the Mexican Government announces a 3-day shutdown. Continuity Solution: Substitute LNG or Propane. Outcome: Unsuccessful. Moving from natural gas to another fuel requires extensive testing of alternative burners and processes. This takes time and money. Learning: Anticipating this kind of a disruption and investigating and preparing contingencies is what BCP is all about. With more lead time, one of these solutions might have been implementable. Case Study: Fuel for Jackson, Mississippi Situation: Hurricane Katrina shuts down our Jackson, Mississippi, plant and devastates the homes of several employees. Employees can’t get around because of lack of gasoline in the area. Continuity Solution: Set up temporary gasoline station inside plant with fuel trucked in from the North. Outcome: Successful. Though unanticipated, Team Indirect was able to locate equipment and fuel to place in Jackson, helping employees with personal recovery activities and in getting the plant back up. Learning: Continuity plans anticipating food, water, and fuel disruptions should be created for all of our plants.

With an extending global footprint, Eaton’s supply chain faces a number of risks … Increasing Single Sourcing Leaner More Inventories Outsourcing Greater Exposure to Supply Chain Disruptions Increasing Demanding & Product Compressed Portfolio & Lead-Times Introductions Extending Increasing Global Supply Manufacturing Chain Footprint Eaton has established an Enterprise Risk Management (ERM) Strategy to identify, address and mitigate risks “A strategy implemented at every level of the organization designed to identify potential events that will adversely affect the corporation and to manage risk to levels deemed acceptable by the World Business Team and Board of Directors.” • • Code of Ethics Code of Ethics “Doing Business “Doing Business • • Ethics Training and Collateral Material Ethics Training and Collateral Material Right” Right” • • Office of the Ombudsman Office of the Ombudsman • • IT Disaster Recovery defined IT Disaster Recovery defined IT Disaster IT Disaster • • Central leadership, decentral execution Central leadership, decentral execution Recovery Recovery • • Data center strategy Data center strategy • • Self-assessment and validation program Self-assessment and validation program SOX 404 SOX 404 • • Financial and IT improvements Financial and IT improvements • • Process improvements being implemented Process improvements being implemented • • HR Pandemic Preparedness Plan HR Pandemic Preparedness Plan Pandemic Pandemic • • Communication protocols established Communication protocols established Disruption Disruption • • Escalation process and partner Escalation process and partner Integrated Integrated • • Event-based risk considerations Event-based risk considerations Contingency Contingency • • Eaton-Site Emergency / Crisis response Eaton-Site Emergency / Crisis response Planning Planning • • Crisis Management Crisis Management • • Logistics risk considerations Logistics risk considerations Supply Chain Supply Chain • • Supply Chain Emergency / Crisis response Supply Chain Emergency / Crisis response Continuity Continuity • • Alternative sourcing strategies Alternative sourcing strategies